PEOPLES BANCORP INC Q4 FY2024 earnings call

• Tyler Wilcox noted net interest income up 3%, net interest margin 4.21%, fee-based income up 10%, efficiency ratio 58%, book value and tangible book value growth. Loan portfolio mix shifted with commercial and industrial loans increasing, commercial real estate loans declining. Deposit balance grew $443 million. Credit quality: overall allowance for credit losses 1% of total loans, provision for credit losses declined, net charge-off rate for full year 37 basis points. Small ticket leasing charge-offs peaked in Q4, strategy to return to 4%-5% net charge-offs.
• Katie Bailey discussed net interest income decline due to lower accretion income, net interest margin 4.15% vs 4.27% Q3, core net interest margin expansion 4 basis points, deposit cost reduction, fee-based income growth, efficiency ratio, balance sheet details (loan-to-deposit ratio 84%, deposit growth $112 million), capital position (capital ratios improved, book value and tangible book value up).

Peoples Bancorp Inc.'s fourth quarter diluted earnings per share was $0.76, with full-year 2024 at $3.31. Net interest income improved 3% vs 2023, net interest margin was 4.21%. Fee-based income grew 10%, efficiency ratio 58%. Book value per share rose 5% to $31.26, tangible book value per share up 10% to $19.94. Loan portfolio mix shifted: commercial and industrial loans grew to 21% of the portfolio from 19%, commercial real estate loans declined to 34% from 36%. Deposit balance grew $443 million (6%). Tangible equity to tangible assets ratio improved to 8.01%. Overall allowance for credit losses was 1% of total loans. Net charge-off rate for full year 2024 was 37 basis points. Non-performing assets declined $21 million to 0.53% of total assets.

• 2025 guidance includes positive operating leverage, expected improvement in return on average assets. Assuming 50 basis point rate cut in 2025, net interest margin to stabilize at 4%-4.2%. Fee-based income growth mid-to high single-digit. Quarterly non-interest expense $69M-$71M Q2-Q4 2025. Loan growth 4%-6%. Provision for credit losses similar to 2024. Net charge-off rate modestly lower in 2025.

• Potential impact of interest rate changes on loan pricing and deposit costs. Economic downturn affecting small ticket leasing portfolio. C&I borrowers impacted by tariffs, which could affect loan performance. Longer tail on small ticket leasing charge-offs if interest rates/inflation don't align with expectations.

Q: Brendan Nosal asked about loan growth divergence between period-end and average.

A: Tyler Wilcox said it was timing, with December production strong due to borrowers getting deals done.

Q: Tim Switzer asked about variable rate loans and funding sources.

A: Katie Bailey said most variable rate loans reprice monthly, with retail CDs and brokered deposits short-term, primary funding through FHLB.

Q: Terry McEvoy asked about C&I growth, CRE paydowns, and leasing portfolio.

A: Tyler Wilcox said C&I growth was broad-based, $350M CRE maturing in 2025, small ticket leasing portfolio expected to decline as charge-offs ramp down towards 4%-5% net charge-offs.

Q: Daniel Tamayo asked about loan yields and credit risk.

A: Tyler Wilcox said loan yields strong, credit risk high due to diversified portfolio, small ticket leasing ramping down to historic levels.

Q: Nathan Race asked about loan yields and M&A.

A: Tyler Wilcox said loan yields strong, active in M&A discussions, poised to be opportunistic if right opportunity arises.

Q: Manuel Navas asked about operating leverage wildcard and DDA trends.

A: Tyler Wilcox said outsized loan growth could drive positive results, Katie Bailey said deposit growth expected 2%-3% annually, may need borrowings for loan growth.

Q: Daniel Cardenas asked about charge-offs covered by reserves and talent acquisitions.

A: Katie Bailey said $3M charge-offs in Q4 covered by specific reserves for leasing, Tyler Wilcox said active in talent acquisition, added 9 commercial bankers recently.